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Paramount merger with Skydance unlikely to benefit shares - analysts

Published 2024-04-09, 01:33 p/m
© Reuters.  Paramount merger with Skydance unlikely to benefit shares - analysts
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Proactive Investors - An effective sale of Paramount Global (NASDAQ:PARA) to Skydance may take time to benefit shares in the Nickelodeon and Comedy Central owner, Bank of America (NYSE:BAC) analysts have warned.

David Ellison’s Skydance is said to have agreed to purchase Shari Redstone’s National Amusements, which holds a 77% stake in Paramount, for US$2 billion, according to Bloomberg.

Paramount would likely in turn merge with production firm Skydance, Bank of America commented in a note on Tuesday, with the latter holding up to 48% of the combined entity.

However, for such a deal to take place, Paramount would have to raise funds through the issue of new shares, in the bank’s view.

“We struggle to see how the prospect of issuing Paramount equity would be positive for shares in the near term,” analysts said as a result.

“The potential for creating value via asset sales down the road has additional execution and timing uncertainty.”

Tax consequences from the likes of future asset sales would then need to be considered, the bank continued, with cost-cutting, disposals and other business restructuring likely to follow such a deal.

Indeed, “heavy lifting” following a deal would likely “take time”, analysts said, meaning such an agreement would not be a “clear win” for existing shareholders.

That said, Bank of America noted the Skydance plan was likely to present the most viable option as the Redstone family looks to depart from Paramount, following offers from the likes of private equity firm Apollo to buy the whole business for US$26 billion.

Bank of America maintained an underperform rating and US$9 share price target on Paramount, adding value could well be realised in the long term.

Paramount shares sat flat at US$11.06 on Tuesday, having fallen over 20% so far this year.

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